Understanding HSN & SAC Codes for GST Invoices

What are HSN and SAC Codes?

Under the GST system, all goods and services are classified for easier identification and taxation. This is done using HSN and SAC codes.

• HSN Code (Harmonized System of Nomenclature): This is a globally accepted system for classifying goods. It's a 6-digit code that helps in systematic classification of products for customs and GST purposes. In India, it is often extended to 8 digits for more detailed classification.
• SAC Code (Services Accounting Code): This is a classification system for services developed by the Service Tax department in India. All services are classified under SAC codes for GST purposes.

Why are HSN/SAC Codes Important on Invoices?

Mentioning HSN/SAC codes on your GST invoices is mandatory. Here’s why:

• Uniform Taxation: It helps in applying the correct GST rates to goods and services across the country.
• Data Reporting: These codes are used when filing GST returns (like GSTR-1), making the data more organized and easier to process for the tax authorities.
• Global Trade: HSN codes are used worldwide, which simplifies import and export procedures.

HSN Code Requirement Based on Turnover

The number of HSN digits you need to mention depends on your annual turnover:

• Up to ₹5 crore: Mandatory to mention at least a 4-digit HSN code for B2B invoices. Optional for B2C.
• Over ₹5 crore: Mandatory to mention at least a 6-digit HSN code for both B2B and B2C invoices.

Using the correct HSN/SAC code is crucial for GST compliance and avoiding penalties.

A good GST billing software allows you to save HSN/SAC codes for your products and services, so they are automatically added to your invoices every time.